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Quantifying the uncertainty of wave energy conversion device cost for policy appraisal: an Irish case study


  • Farrell, N.
  • O'Donoghue, C.
  • Morrissey, K.


Wave Energy Conversion (WEC) devices are at a pre-commercial stage of development with feasibility studies sensitive to uncertainties surrounding assumed input costs. This may affect decision-making. This paper analyses the impact these uncertainties may have on investor, developer and policymaker decisions using an Irish case study. Calibrated to data present in the literature, a probabilistic methodology is shown to be an effective means to carry this out. Value at Risk (VaR) and Conditional Value at Risk (CVaR) metrics are used to quantify the certainty of achieving a given cost or return on investment. The certainty of financial return offered by proposed Irish Feed-in Tariff (FiT) policy is analysed. The influence of technological ‘learning’ is also discussed. The model presented identifies those rates of learning required to achieve cost-effective deployment under various cost certainty requirements. The corresponding cost reduction targets for developers are identified. Uncertainty is found to have a greater impact on the investment decision when learning progresses at a slower rate. This paper emphasises the requirement for a premium to account for cost uncertainty when setting FiT rates. By quantifying uncertainty, the presented methodology allows for the required premium to be identified.

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  • Farrell, N. & O'Donoghue, C. & Morrissey, K., 2014. "Quantifying the uncertainty of wave energy conversion device cost for policy appraisal: an Irish case study," Working Papers 186383, National University of Ireland, Galway, Socio-Economic Marine Research Unit.
  • Handle: RePEc:ags:semrui:186383
    DOI: 10.22004/ag.econ.186383

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    Cited by:

    1. John Hutcheson & Adrián De Andrés & Henry Jeffrey, 2016. "Risk vs. Reward: A Methodology to Assess Investment in Marine Energy," Sustainability, MDPI, Open Access Journal, vol. 8(9), pages 1-44, August.
    2. Ramos, V. & Ringwood, John V., 2016. "Exploring the utility and effectiveness of the IEC (International Electrotechnical Commission) wave energy resource assessment and characterisation standard: A case study," Energy, Elsevier, vol. 107(C), pages 668-682.
    3. Adrian De Andres & Jéromine Maillet & Jørgen Hals Todalshaug & Patrik Möller & David Bould & Henry Jeffrey, 2016. "Techno-Economic Related Metrics for a Wave Energy Converters Feasibility Assessment," Sustainability, MDPI, Open Access Journal, vol. 8(11), pages 1-19, October.
    4. Foteinis, S. & Tsoutsos, T., 2017. "Strategies to improve sustainability and offset the initial high capital expenditure of wave energy converters (WECs)," Renewable and Sustainable Energy Reviews, Elsevier, vol. 70(C), pages 775-785.
    5. Niall Farrell & Cathal O'Donoghue & Karyn Morrissey, 2020. "Regional income and wave energy deployment in Ireland," Papers in Regional Science, Wiley Blackwell, vol. 99(3), pages 509-531, June.

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